Piracy: Eroding the Economy

Posted in Marketing & Strategy Articles, Total Reads: 4144
, Published on 12 May 2011

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In the fast growing world of today, everyone wants to earn quick money, by fair or foul means. The easiest way they find is to imitate products of an already existing and established brand and make it available to the consumer at a cheaper rate than the branded product. Such products are openly sold in the market as cheap imitations. As far as clothing, fashion accessories and travel bags etc are concerned, they reach the consumer as soon as the product appears in the market. Sometimes the brand name is miss-spelt to confuse the buyer. CDs, electronic items and the like are also available at lower rates to attract the consumer, who does not have much technical knowledge anyway about these products.

Piracy, as it is generally termed, incurs great financial losses not only to the Government of a country but also brings down the brand-image of a product. Piracy of software causes revenue losses worth billions of dollars to software companies and makes their cash reserves dwindle day by day. Sudden inflow of software from various unknown sources in developing countries enables the consumers to buy it even though the sources maybe illegal. On the other hand, developed nations create awareness among their consumers to buy original and genuine software only from legal sources even though they have to pay an extra buck.

Many times, while purchasing a piece of hardware, as part of the package, the software comes without any extra cost. Pirated versions of software then becomes a habit because the consumer takes it for granted. Since it is inexpensive and freely available, the consumer buys it knowing fully well that the source is illegal. From time to time, some software companies mail legal notices and try to educate the end users and retailers against such illegal practices. In emerging economies and developing nations, more than 7 in 10 businesses use pirated versions of software to cut costs. Even today, consumers want software free or at minimal cost, despite having the purchasing capacity.

Bringing down the level of piracy is a herculean task. But with the availability of newer versions of software in the market and its high initial cost, companies are reluctant to pay more. Piracy causes losses to the Government exchequer by thousands of crores per year and contributes to the black money. In fact, if the Companies purchase genuine software, it is a long-term investment and later up-gradation requires a much smaller amount. Software companies give valid reasons for buying legalized and authorized versions of their products. They also give various offers to bring down the prices for their buyers, e.g. a collection of software as per the requirements of the consumers etc. Although large software companies like Microsoft and Adobe may not be affected by lesser returns on investments but piracy does affect the smaller software developers who make utility software with innovative versions. Localization of software is also an obstacle to attract foreign investment. Piracy indirectly affects non-english speaking developing nations in the long run by scaring off foreign software giants who wish to invest in their country.

Consumers must thus acquire the habit to buy software legally whereas software companies should provide the users with more choices at an affordable price. Piracy affects small vendors by discouraging their innovations and also violates copyrights of the brands.

Business Organisations have to face tremendous competition from existing brands and have a tough threat from substitute products as well. But one area of business which eats into their market share like a termite is piracy.

About the Author : Sunita Saharia is a legal expert and the co-founder of the NGO (International Society for Human Awakening and Development).